MUMBAI Dec 7 India's central bank on Friday
urged investors to buy less physical gold as a hedge against
rising prices and instead invest in financial products like
inflation-linked bonds, as it continues attempts to curb high
imports of the metal.
India, the world's biggest gold buyer, has been trying to
curb the inflow of gold since late last year by hiking taxes on
In October, the Reserve Bank of India told banks not to
finance purchase of gold in any form other than for working
Deepak Mohanty, executive director of the Reserve Bank of
India, said high gold imports were weighing on the country's
current account deficit and suggested investors shift their
investments to bonds that provide a hedge against inflation.
"Inflation-indexed bonds could also be another option to
offer investors inflation-linked returns and detract them from
gold investments," Mohanty said in a speech released on Friday.
India's physical gold demand has taken a hit this year, due
to a weak rupee and higher import taxes. But industry officials
expect demand to pick up next year due to more auspicious days
for weddings and prospects of a stronger rupee.
The country's current account deficit is
expected to reach a record high at around 4.9 percent of GDP in
the September quarter after narrowing to 3.9 percent in the
June-quarter. It hit 4.5 percent in the April-March period.
(Reporting by Neha Dasgupta, additional reporting by Siddesh
Mayenkar; Editing by Sanjeev Miglani)